The Mistaken Attack on Outsourcing

That is the title of an article by Mihir Desai, a professor of finance at Harvard Business School. It was from the WSJ, 12-29-2010, p. A11. See The Mistaken Attack on Outsourcing: When American firms grow abroad, they also grow domestically. Here is the key excerpt:

"When American firms grow abroad, they also grow domestically, as demonstrated by research I conducted with C. Fritz Foley of Harvard and James R. Hines Jr. of the University of Michigan (published in the American Economic Journal: Economic Policy, 2009).

The data do not support the crude, fixed-pie intuition that firms either invest abroad or at home. Ten percent growth in American firms' foreign investment is associated with 3% growth in their domestic investment. And when firms grow abroad, their domestic exports and R&D activities grow especially, contrary to Mr. Obama's rhetoric."

"Vilifying or penalizing American businesses for their global operations will only lead them to consider leaving the U.S.—or consider being bought by foreign companies. Such moves would hurt America by removing valuable headquarter jobs. Instead, Mr. Obama should emphasize how Americans succeed when our firms succeed world-wide. That formulation better captures reality and offers a more sensible way to engage businesses in a new spirit of cooperation."